Logos for the microblogging site Twitter, displayed on the internet on Sept. 13 in London. / Mary Turner, Getty Images

by Tim Mullaney, USA TODAY

by Tim Mullaney, USA TODAY

The quality of Twitter's newly released financial information is such a mishmash that even grizzled financial writers are willing to borrow a trick from Sex and the City, where each episode was built around a question that anchored the weekly column of its heroine Carrie Bradshaw.

How do you play Twitter's initial public offering without looking like a twit?

The answer is found in the four fundamentals of any sharp IPO investor:

1. How fast are the company's sales growing, and is its market already large and still promising?

2. Is this timing right for this company's IPO? The best time for an Internet company to go public historically has been right around the time it turns profitable -- give or take a few months. The biggest part of the risk is behind the company and there's still enough growth potential to make things interesting.

3. The so-called "does it scale" question: Can the company boost profits much faster than its sales grow? The easiest way for profits to double isn't to double sales: It's to grow while also improving profit margins by restraining spending.

4. Is the valuation reasonable?

Look, the twit would be the investor who doesn't realize that Twitter will be a hot deal, regardless. Even if the company commands less than the $14 billion valuation it reportedly seeks, Twitter is quite likely to raise $1 billion or more at what would be a nosebleed-inducing price-to-earnings multiple for nearly any other company.

But to keep from getting burned after the IPO hoopla subsides, investors need to do their homework. So here are some answers:

1. No doubt Twitter is growing fast -- though, it must be said, not quite as fast as it once was. Revenue rose 107% to $253.6 million in the first half of this year. But in 2012, sales nearly tripled and they almost quadrupled in 2011. Analysts predict the company can grow revenue about 70% in 2014.

The social-media ad market where Twitter can make money is vast but not infinite. My colleague Scott Martin cites experts who forecast 25%-a-year growth through 2015. Attention-getting, but also worth acknowledging that the days when Twitter's growth will slow are on the horizon.

2. Twitter is going public at the right time. Though many press reports will focus on Twitter's net income losses, savvy investors know to look at the social media giant's cash flow. Why? It doesn't include expenses like depreciation, which matter more to the accountants than to growth-seeking IPO buyers.

Twitter's operating cash flow turned positive in the first half of this year. On that basis, the company turned a $9.66 million profit vs. a $23 million loss in the same period a year ago.

That puts Twitter at the ``tipping point,'' where fixed expenses are at last covered by revenue and new advertising clients should drive improving profit margins. That margin expansion is what allows investors to invest in IPOs with very high P-Es (or, under Generally Accepted Accounting Principles, no P-E at all) and get a good night's sleep.

3. Whether Twitter "scales" is not a given. Revenue gains year to date are outstripped by a 141% jump in R&D spending, which accounts for 44% of revenue.Google spent 13% of sales on R&D last year. Its marketing budget is also growing 20% faster than its revenue, though other overhead costs appear to be in check.

If Twitter can explain why its R&D and marketing projects will generate returns, and -- more importantly -- show the spending spike is temporary, investors will calm down. More persistent spending growth will cut into future profits, especially if social-media ad spending growth decelerates as forecast.

4. That presents the most important question -- valuation. If Twitter hits $1 billion in revenue in 2014, the company may be asking investors to pay 14 times next year's sales. By comparison, Amazon.com commands about 1.6 times sales. Salesforce.com is at 6 and Facebook is getting 12, but is far more profitable even on a cash-flow basis than Twitter. And none of these stocks are cheap themselves.

The bottom line: Nearly all Internet IPOs that become the success stories Twitter's founders aspire to be have endured painful post-IPO periods in which the stock price tanks because the company misses a quarter or makes some other mistake. It's normal. IPOs are risky by nature. It happens to the best, including to Facebook last year.

At a $14 billion valuation, Twitter's IPO would pose more risk than some Mom and Pop investors like, and certainly if it pops higher afterward it would be in rarely-charted territory. But at $10 billion to $12 billion, the valuation would look a lot like Facebook's. And for two companies that have so much in common, valuations in the same neighborhood sound plausible. Long-term investors can see Twitter's on pace for $1 billion dollars in revenue next year, and that clearly is valuable even before Twitter's profitable. And arguments about how fast profits will grow, and how long hyper-growth can last, are normal.

Twitter's a hitter, with a business that --well, almost-- matches its unique cultural sway and its over-the-top hype. Yes, dear Carrie, baby will definitely be able to afford a new pair of shoes.